Dollar Strengthens, Asia Stocks Slide on Tariffs, PCE in Focus

The EUR/USD pair fell 0.69% on Thursday, slipping below the critical 1.1700 level pressured by strong US economic indicators and broad US Dollar strength.

The US economic calendar highlighted a resilient economy, which pressured the Euro. Labor market data pointed to continued strength, economic growth exceeded expectations, manufacturing orders rebounded strongly, and the housing sector remained stable, all reinforcing the dollar’s momentum.

The strong economic data boosted the US Dollar and tempered expectations for a Federal Reserve rate cut. According to Fed CME WatchTool, the probability of a 25-basis-point cut at the October 19 meeting fell 87%. Fed officials sent mixed signals: Governor Stephen Miran emphasized the need for policy rates to fall 200 basis points below current levels, suggesting cuts in 50-basis-point increments. Chicago Fed President Austan Goolsbee opposed front-loading rate cuts due to persistent inflation, while Kansas City Fed President Jeffrey Schmid noted that the Fed is close to meeting its dual mandate and that last week’s rate adjustment was appropriate.

Economic data from the Eurozone offered limited support to the shared currency. Germany’s GfK Consumer Sentiment improved slightly, mainly due to higher income expectations, but sentiment remains negative.

Geopolitical tensions, including concerns over Russian drone activity in certain European nations, could also add additional pressure on the Euro in the near term.

Bitcoin slipped below $110,000 on Thursday amid a broad sell-off in both cryptocurrency and stock markets. The largest digital asset dropped over 3%, while Ethereum, Solana, and other altcoins suffered even steeper losses.

Ether fell roughly 5% to below $3,900, marking its lowest level since August, before slightly recovering.

The downward momentum has been fueled by a lack of buying power following a wave of liquidations earlier this week.

The sell-off coincides with declines in the broader equity market, as investors grapple with concerns about overvaluation in AI-driven stocks and uncertainty over the Federal Reserve’s interest rate strategy.

Adding to pressure, the Treasury General Account has been replenished through T-bill and bond issuance, effectively drawing liquidity away from risk assets such as Bitcoin and other cryptocurrencies.

Investors remain cautious as liquidity pressures, macroeconomic uncertainty, and seasonal volatility continue to weigh on the crypto market.

Oil prices extended gains in Asian trade on Friday, remaining above a seven-week high and on track for a strong weekly rise. The market was supported by concerns over Russian supply disruptions and a larger-than-expected drawdown in U.S. crude inventories.

Russia announced partial curbs on diesel exports and an extension of its gasoline export ban through the end of 2025 to protect domestic fuel supplies. The situation has been compounded by Ukrainian drone strikes on energy facilities in Bryansk, Samara, and Bashkortostan, raising concerns over the reliability of Russian crude and product exports. Additional potential sanctions by Washington and its allies could further constrain Russian supply.

Data this week highlighted a notable decline in U.S. crude stocks. The American Petroleum Institute estimated a 3.8 million barrel draw for the week ending Sept. 19, while official Energy Information Administration figures confirmed a smaller but still significant reduction.

Bullish momentum was tempered by fresh U.S. tariff announcements and stronger economic data. President Donald Trump announced new duties on pharmaceuticals, kitchen equipment, and heavy trucks, reviving concerns over global trade tensions. A 25% tariff on heavy-duty trucks could impact diesel demand by raising transportation costs.

Investors are now focused on the upcoming personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, for signals on monetary policy and future fuel demand.

The US 500 declined on Thursday for the third consecutive day, as stronger-than-expected economic data tempered hopes for deeper Federal Reserve rate cuts, pushing Treasury yields higher and weighing on technology stocks. The broader market has been retreating from recent highs amid concerns over stretched valuations and uncertainty about the Fed’s next moves.

U.S. jobless claims declined and economic growth came in stronger than expected, suggesting the Federal Reserve may approach future rate cuts cautiously. Investors are now focused on the upcoming personal consumption expenditures (PCE) index, the Fed’s preferred measure of inflation, which could provide further insight into the central bank’s monetary policy trajectory.

Adding to market caution, a looming partial U.S. government shutdown has raised concerns about potential disruptions. Lawmakers remain deadlocked over funding, with the Senate recently rejecting a stopgap bill that would have kept the government funded until November 21. Federal agencies are reportedly preparing contingency plans in case of layoffs or other disruptions.

In corporate news, NVIDIA rose after stabilizing from a recent dip, while Intel gained following reports of a potential investment from Apple. Other companies continue to face earnings pressure, highlighting the mixed sentiment in the market as investors balance economic data, Fed policy expectations, and geopolitical risks.